Aniket PujariAs the market sell-off deepens, the Nasdaq has now endured a 14% correction in the last three weeks. Corrections are a natural part of market cycles, allowing valuations to reset and paving the way for a healthier bull market. Even the “Magnificent Seven” stocks haven’t been spared, including Nvidia , which has plunged more than 25% from its highs despite beating earnings expectations. Like many other stocks trading at a steep discount, this sharp decline appears overdone, presenting a potential buying opportunity that could materialize in the coming days. While oversold conditions create buying opportunities, the challenge lies in timing the dip correctly—and technical analysis can provide valuable insights. Below is a one-year daily chart of NVDA, where I’m tracking two key technical indicators for a potential trade setup: 10, 21, 34 EMAs (blue, yellow, and pink lines) – As long as these EMAs are pointing down, the downtrend remains intact, signaling that the sell-off isn’t over yet. MACD – The MACD line and signal line help identify trend reversals. A crossover occurs when the MACD line crosses above the signal line, signaling a shift in momentum. Since MACD is a lagging indicator, I’ve adjusted the settings to 5,13,5 instead of the traditional 12,26,9, allowing for a faster signal. At the time of writing, neither the EMAs are turning upward nor has the MACD crossover occurred. This means, if one wants to play safe, it’s a waiting game for now. However, with the tech sector primed for a sharp rebound, this trade could shape up in the coming days. The Trade Setup: NVDA bull call Spread To initiate a bullish position on NVDA, I am using an options strategy known as a “bull call spread.” To construct this trade, I need to buy an at-the-money (ATM) call option and simultaneously selling an out-of-the-money (OTM) call option as part of the same trade. Here is an example trade setup assuming NVDA is trading at $115/share after market open. Buy $115 call, April 11 expiry Sell $116 call, April 11 expiry Cost: $50 Potential Profit: $50 Notes: Strike selection : Strikes will depend on NVDA’s price at the time one is looking to enter the trade. The long call should be ATM, and the short call should be OTM, thereby allowing one to construct this bull call spread. Expiration : It is best to give these trades 24-35 days to play out in your favor, especially when dealing with deep corrections like the one we have just experienced. Profit target : If NVDA trades at or above the short strike by the expiration date, this trade will yield a return of 100% on the amount risked. With 50 contracts, this equates to risking $2,500 to potentially gain $2,500. go into many setups like these in my book, Mean Reversion Trading, available here . You can also find more examples on my website . -Nishant Pant Founder: https://tradingextremes.com Author: Mean Reversion Trading YouTube, Twitter: @TheMeanTrader DISCLOSURES: Nishant has an NVDA bull call spread expiring on April 11. All opinions expressed by the CNBC Pro contributors are solely their opinions and do not reflect the opinions of CNBC, NBC UNIVERSAL, their parent company or affiliates, and may have been previously disseminated by them on television, radio, internet or another medium. THE ABOVE CONTENT IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY . THIS CONTENT IS PROVIDED FOR INFORMATIONAL PURPOSES ONLY AND DOES NOT CONSITUTE FINANCIAL, INVESTMENT, TAX OR LEGAL ADVICE OR A RECOMMENDATION TO BUY ANY SECURITY OR OTHER FINANCIAL ASSET. THE CONTENT IS GENERAL IN NATURE AND DOES NOT REFLECT ANY INDIVIDUAL’S UNIQUE PERSONAL CIRCUMSTANCES. THE ABOVE CONTENT MIGHT NOT BE SUITABLE FOR YOUR PARTICULAR CIRCUMSTANCES. BEFORE MAKING ANY FINANCIAL DECISIONS, YOU SHOULD STRONGLY CONSIDER SEEKING ADVICE FROM YOUR OWN FINANCIAL OR INVESTMENT ADVISOR. Click here for the full disclaimer.
